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AFFORDABLE HOUSING: IT’S NOT JUST FOR THE POOR ANYMORE

Apartment 23D and apartment 24D are two identical units in Hunters Point South, New York City’s largest affordable housing project in over thirty years. Both contain 1100 square feet, have two bedrooms, all new modern appliances, exquisite views, and access to luxury amenities such. The only difference between the two apartments is their monthly rents: 23D’s is $4,200 and 24D’s is $2,800.

Now let’s look at several hypothetical tenants for these apartments:

Joe makes $125K a year as an IT guy. His wife works and makes 50K, 75K, 100K, you pick it.

Jim makes $125K a year as an IT guy. His wife doesn’t work.

John is a 24-year old making $125K a year working for his dad’s real estate company. He is debt free and has a big trust fund.

Jerry is a 36-year old doctor earning $250K a year m with $150m in med school debt

Jim and John qualify for the $2,800 subsidized apartments, Joe and Jerry do not. Can we discern any pattern from this? No we cannot, and neither can the government. That’s exactly why their drift away from the admirable effort to provide shelter for the poor has gone haywire. The best way is to let the free market set prices. That way people can make their own choices: Should their wife work? Should they live farther from their jobs and pay less for housing? Should they live closer to their jobs and have less square footage?

I don’t mean to go all Ayn Rand on you, I believe the U.S. governmentt has a very important role to play in regulating the country1, but people make their own career choices. Why should someone choosing to be a doctor or lawyer or accountant only be allowed in apartment 23D, while those choosing to be a teacher, social worker, or fireman get access to the lower rents of 24D? There is a perverse disincentive to not earn too much, or just hide black market income from the government.

Finally, if the goal is to help more middle income people find affordable housing, there clearly is a more optimal way of doing so, though it would place them in slightly less extravagant and convenient settings. Flushing, Woodside, and even other areas of Long Island City offer much less expensive, and thus more expansive, availability and alternatives.

But who knows, that may not really be the objective of coalition-building politicians. The promise of a lottery may be more enticing than the reality of a solid but mundane home. Either way the upper middle class gets squeezed, as the supply of market rate housing that they qualify for is decreased2, leading to higher rents according to the law of supply and demand. As an added bonus, they get to pay for the subsidy for their adjacent neighbors via their higher taxes and net tax rates. Keep that in mind whenever an elected official talks about affordable housing.

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